Formula E is approaching end of its third season, but is the project financially viable? According to its CEO Alejandro Agag the future is bright.

A Formula E visit to the Arctic Ice Cap indicates where some of the marketing and promotional costs are coming from

Formula E noted losses in the first two seasons, but that doesn’t surprise anyone, as that is a common affliction of any new business.

And the results seem to be headed in the right direction.

“Accounts filed at Companies House showed Formula E Operations Ltd reduced its operating loss to 33.7 million euros ($38.32 million) at end-July 2016, a period covering its second season, from a previous 62.7 million.

Net liabilities rose to 107.2 million euros from 72.1 million, while total revenues reached 56.6 million from a previous 19.7 million.”

The question is how far Formula E is from break even? Agag encourages it could be achieved at any time, but instead the company is opting to accelerate expansion, and make deeper investments at this stage.

“Everything is going according to plan,”

“Actually we are doing incredibly well financially according to our plan.”

“We could have broken even this year but we decided to invest more in marketing and promotion. We decided to add races like the one in New York, which is in year one a race which is costing, we have significant capital expenditure.”

“It’s really up to us when we want to go to break even or not. We could be in break-even now, we could be in break-even next season but we may decide to invest more in marketing and promotion.”

Formula E is the only global electric racing series, so the ongoing electrification movement certainly works in favor of Formula E. As a result, more and more manufacturers are interested in joining the series, especially as the expense to do that at this point is relatively small ($10-15 million, compared to $300 million in the example of Toyota team participating in the World Endurance Championship).

Recently, Audi dropped the World Endurance Championship, and instead focused on the Formula E, and saved some €100 million in the process according to Reuters.

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It appears to be headed in the right direction. With the level of manufacturer interest they have now the the ship will be righted and Formula will move to the more normal state of a successful series where the series makes money and the teams lose money hand over fist.

Big time racing is big time expensive. Their new challenge will be to try to keep the smaller teams in when big companies like Audi (VW) come in and spend a lot of money and take all the podium spots. The smaller teams will find themselves paying more and more to do worse and worse in the finishing rankings.

And if it sounds like I’m saying they are messing up I’m certainly not. This is the natural state for a high level series and it’s a difficult transition to manage. Formula E seems as well staffed to manage it as anyone else.

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1 year ago

Nada

I beleive the smaller teams are able to buy the drivetrains from any of the teams listed as a manufacture (which you have to be to make your own drivetrain) in Formula E…
BMW and Mercedes are most likely joining for season five when they no longer swap batteries midway through the race…
Plus yheir are already some big name/money teams…
Jaguar Panasonic…
DS Renault…
Miranda an India car manufacture…
Plus a couple of Chinese teams and Andrati Autosports if you are familar with Indy…

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1 year ago

unlucky

I assumed that BMW and Mercedes will come in. And spend (ie. lose) a lot. And the cheap companies can buy parts but you’re not going to beat the werks teams buying cheap parts. Because they buy expensive parts and do more development.

Take a look at the back markers in Formula 1. Take a look at the DPI versus LMP2 teams in IMSA. Take a look at any series. Having big companies come is good for the series (generally) and the fans, but it means the teams have to spend more and more. And even the back end of the grid end up spending more and more just to continue to lose.

“swap batteries”. I wish. They swap the entire car. And with an enforced minimum swap time. So very lame.

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1 year ago

=j

I think it was Colin Chapman who said, “If you want to make a small fortune is auto-racing, you must start with a large fortune.”